“A messenger just handed me some papers. It looks like I’ve just been sued for trademark infringement. What’s this mean?”
I get this question often enough that I thought I’d summarize my answer. Here are the highlights:
1. The plaintiff’s rights. If the plaintiff has a federal trademark registration, it is entitled to the presumption that it is the exclusive, nationwide, user of the mark in connection with the goods and/or services listed in its registration. The standard for trademark infringement is “likelihood of confusion,” which means that if ordinary consumers would think that goods or services associated with a later-adopted trademark come from, are approved by, or have something to do with the registrant, the earlier-adopter is entitled to have the later adopter back away from the confusingly similar mark. The standard is not “identicality,” so it does not matter if relatively trivial differences exist between the marks. And even if the plaintiff’s mark is not registered, it has common law rights that automatically arise through its use in customer sales/distribution. Unlike a federal registration, those rights are limited to the geographic areas in which the plaintiff makes sales or distributes product. However, its rights are perfectly valid as well.
2. The defendant’s defenses. That is not to say that all conflicting trademark use is infringing. A defendant can use descriptive words to accurately convey information about its goods or services regardless of the plaintiff’s trademark rights. This is a form of a fair use, and is readily recognized in the law. Another limitation is geographic remoteness, meaning that if an unregistered trademark is only used in Miami, for example, the trademark owner has no rights to assert against a competing trademark owner in Seattle. Indeed, this principle is good reason for trademark owners to obtain a federal registration. There are other ways for a defendant to push back, including that no likelihood of confusion exists because the parties’ marks are different; the goods/services sold with the marks are different; the target consumers are different; the parties advertise and sell through different marketing channels; and the parties have coexisted for a long period of time without consumers being actually confused. These are but a few of the possible defenses.
3. The merits may not matter. Having just touched on the merits of the parties’ positions, it is important to understand that, for practical purposes, the merits may not really matter. What instead may drive the result is which party has more money, or which is more motivated to see the case through to the end. If one side has the resources to devote to the lawsuit and the other does not, the side with the resources naturally will win. Regardless of the merits, the party with the resources and fortitude can win a war of attrition. In other words, it can spend the other side to death. It is sad but true, and is a reality that defendants with limited resources need to come to terms with as early in the dispute as possible. Doing so will enable them to devote their more limited resources strategically and help effect as favorable an outcome (often through settlement).
4. A lawsuit is a business problem. Besides being expensive, litigation can be disruptive. It takes an organization’s key decision makers away from serving customers, improving products, and making sales, and forces them to devote time and energy to the lawsuit. Trademark owners are often emotional about their marks and want to defend their rights (perceived or real) to the death. That’s often a mistake. Regardless of the size of the defendant’s business, there’s almost always a better way to spend time and money than in a lawsuit. Smart litigants view litigation as a business issue and deal with it accordingly. Emotional litigants do not make for rational litigants.
5. Neither damages nor attorney’s fees will drive the litigation. In trademark cases, the main remedy the plaintiff seeks is an injunction. In other words, the plaintiff’s main motive for filing suit is to get the defendant to stop using its confusingly similar trademark. Proving money damages can be difficult. And getting an award of attorney’s fees is rare. Therefore, effecting a name change usually is the plaintiff’s goal. Except for extreme cases, win, lose, or draw, both sides will pay their own way in the litigation. More often than not, no money in the lawsuit will change hands.
6. Most cases settle. The vast majority of lawsuits won’t go from start to finish. It’s just too expensive, and too risky, for most parties to see a lawsuit through to the end (which can be a year or more from the date the case is filed). What happens to those cases? Either one side gives up; one side wins before trial; or the parties agree to settle. It’s usually hard for one side to win before trial because the issues in a trademark case usually are too factually-intensive for a judge to declare a winner without the benefit of trial. That means most cases end in settlement. Settlement is voluntary, of course, and the terms of settlement depend on what the parties are able to negotiate. For a plaintiff to accept settlement, however, it usually needs to accomplish its goal of effecting a change in the defendant’s trademark. Sweeteners to help persuade a defendant to settle would include (obviously) dismissing the lawsuit; obtaining a release from liability; obtaining a phase-out period for stopping use of its trademark over time, rather than abruptly, as would happen through an injunction; and whatever other terms a defendant can negotiate based on the facts and circumstances of its particular case.
7. The defendant needs to answer. After being served, defendants generally have 21 days to file an answer in the lawsuit. Failure to do so risks having the court give the plaintiff a win by default. A default judgment not only means the plaintiff (usually) would get an injunction prohibiting the defendant from using its mark, but it also increases the risk the court would award the plaintiff damages and attorney’s fees. These hammers give the plaintiff extra bargaining power in settlement, which the defendant can (and should) avoid by participating in the lawsuit. Merely starting settlement talks does not stop the 21-day clock, so a defendant either needs to file a timely answer or get the plaintiff’s agreement not to move for default while the parties are discussing settlement. Even then, the court still could enter default on its own, though that usually does not happen without warning.
8. The defendant needs a lawyer. If the defendant is an LLC, corporation, or other corporate entity, it will need a lawyer to represent it in court. It’s not an option for the owners of such entities to represent their company pro se, or without a lawyer. While it’s never advisable for nonlawyers to represent themselves in court, it’s not even an option in most trademark infringement cases. Nor should defendants think they will get a free attorney appointed to represent them in court. Public defenders are reserved for criminal defendants who can’t afford a private lawyer. For these reasons, defendants need to find a lawyer on their own.
Trademark infringement lawsuits have many moving parts. Each case is driven by its own facts and circumstances. The issues described above are common, and hopefully this discussion is helpful to those who find themselves sued for trademark infringement. But, of course, it is no substitute for sound legal advice.